Trump Is Pushing Apple Very Hard To Make iPhones In The U.S.

Friday, November 25, 2016 5:49

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From Joseph Jankowski: While speaking with the New York Times, President-elect Donald Trump said that he received a call from Apple Inc. (NASDAQ:AAPL) CEO Tim Cook on Monday in which he pushed the CEO about bringing manufacturing jobs back to the United States.

“I got a call from Tim Cook at Apple, and I said, ‘Tim, you know one of the things that will be a real achievement for me is when I get Apple to build a big plant in the United States, or many big plants in the United States, where instead of going to China, and going to Vietnam, and going to the places that you go to, you’re making your product right here.’ Trump told the NYT on Tuesday.

Trump said that Cook understood. He also mentioned that his incentive plan, which includes a “very large tax cut” and “substantial regulation cuts” for corporations, will bring Apple into the U.S. to manufacture.

‘I think we’ll create the incentives for you, and I think you’re going to do it. We’re going for a very large tax cut for corporations, which you’ll be happy about.’ But we’re going for big tax cuts, we have to get rid of regulations, regulations are making it impossible. Whether you’re liberal or conservative, I mean I could sit down and show you regulations that anybody would agree are ridiculous. It’s gotten to be a free-for-all. And companies can’t, they can’t even start up, they can’t expand, they’re choking.

Recent reports have suggested that Apple may have some interests in exploring a manufacturing facility in the United States.

Key Apple assembler Foxconn Technology Group has been studying the possibility of moving iPhone production to the U.S., sources have told the Nikkei Asian Review.

“Apple asked both Foxconn and Pegatron, the two iPhone assemblers, in June to look into making iPhones in the U.S.,” the source said. “Foxconn complied, while Pegatron declined to formulate such a plan due to cost concerns.”

Foxconn chairman Terry Gou is unenthusiastic over Apple’s request, saying “Making iPhones in the U.S. means the cost will more than double.”

While we don’t have concrete cost figures (and Apple will never provide them), analysts predictthe iPhone 7 costs approximately $224.80 to make in China. Here’s the part that you can’t overlook:

The total cost of the build, according to data from IHS Markit, adds up to $219.80. Once you factor in labor costs, estimated at $5 per phone, the total build runs $224.80 for the base model, 32GB iPhone 7. The company claims that this is an increase of $36.89 per unit, as opposed to the $187.91 iPhone 6s base model from last year.

Good luck getting labor down to $5 a unit in the US.

Apple CEO Tim Cook also put a grim outlook on the chances of Apple making products in the U.S. last year when he told 60 Minutes he believes the U.S. likely does not possess the skilled labor force capable of matching overseas output.

China put an enormous focus on manufacturing. In what we would call, you and I would call vocational kind of skills. The U.S., over time, began to stop having as many vocational kind of skills. I mean, you can take every tool and die maker in the United States and probably put them in a room that we’re currently sitting in. In China, you would have to have multiple football fields.

Trump’s optimism and willingness to provide tax cuts and deregulation for manufacturers is exactly what needs to happen for the U.S. to get on the path to produce goods again, but unfortunately, the reality of the situation is not all that simple.

Apple shares fell $0.32 (-0.29%) to $110.90 in premarket trading Friday. Year-to-date, AAPL has gained 5.66%, versus an 8.25% rise in the benchmark S&P 500 during the same period.